BY COMFORT OGBONNA
U.S. stocks finished higher on Tuesday, with the S&P 500 ending at a fresh record, as a wave of economic data underscored the strength of the U.S. economy and pushed bond yields upward, favoring growth-oriented shares. Investors digested a stronger-than-expected reading on economic growth, which reinforced confidence in consumer resilience while simultaneously tempering expectations for near-term interest rate cuts by the Federal Reserve.
According to the Commerce Department, U.S. gross domestic product expanded at an annualized rate of 4.3% in the third quarter, marking the fastest pace since the third quarter of 2023 and comfortably exceeding economists’ expectations of 3.3%.
The robust growth was largely driven by solid consumer spending, highlighting continued momentum in household demand despite elevated borrowing costs. Although the data release was delayed due to the 43-day government shutdown and many analysts had anticipated a moderation in economic activity in the fourth quarter, the unexpectedly strong figures prompted markets to reassess the trajectory of monetary policy.
As a result, bond yields climbed, particularly at the shorter end of the curve, as traders priced in a reduced likelihood of a January rate cut by the Federal Reserve. Market participants noted that while higher yields can be a headwind for certain sectors, they tend to benefit large-cap growth and technology stocks that have demonstrated strong earnings momentum.
Stephen Massocca, senior vice president at Wedbush Securities, said the bond market reacted negatively to the growth surprise, adding that growth stocks often perform well in such environments, while more rate-sensitive industries such as food, chemicals, energy, and private credit can struggle unless interest rates begin to fall.
By the close, the Dow Jones Industrial Average rose 79.73 points, or 0.16%, to 48,442.41. The S&P 500 gained 31.30 points, or 0.46%, to finish at 6,909.79, while the Nasdaq Composite advanced 133.02 points, or 0.57%, to 23,561.84. The S&P 500 growth index climbed 0.8%, significantly outperforming the value index, which ended largely unchanged, underscoring investors’ preference for growth-oriented names.
Technology and artificial intelligence-related stocks extended their recent rebound after last week’s pullback, which had been triggered by concerns over stretched valuations and the potential impact of heavy capital spending on future profits. Nvidia jumped 3%, providing the single biggest boost to the S&P 500, while Amazon, Alphabet, and Broadcom each rose more than 1%, reflecting renewed optimism around the long-term prospects of large-cap tech leaders.
Not all economic indicators were equally encouraging. Separate data showed U.S. consumer confidence weakened in December, as concerns over job security and income prospects deepened. Factory production was flat in November following a decline in October, pointing to some softness in manufacturing activity even as overall economic growth remains strong.
Despite these mixed signals, all three major indexes remain on track for a third consecutive annual gain. The S&P 500 and the Dow are also poised to record their eighth straight month of advances, reinforcing bullish sentiment heading into the final days of the year. The recent rally has fueled hopes of a so-called “Santa Claus rally,” a seasonal pattern in which stocks often rise during the last five trading days of December and the first two sessions of January. This period begins on Wednesday and runs through January 5.
Trading volumes were relatively light and are expected to thin further as the Christmas holiday approaches. U.S. stock markets are scheduled to close early at 1 p.m. ET on Wednesday and will remain closed on Thursday. Total volume on U.S. exchanges reached 14.01 billion shares, below the 20-day average of 16.67 billion.
On the corporate front, ServiceNow slipped 1.5% after the enterprise software company agreed to acquire cybersecurity startup Armis for $7.75 billion in cash. Huntington Ingalls edged up 0.3% after President Donald Trump announced plans for a new “Trump class” of battleships, which he said would be larger, faster, and significantly more powerful than existing vessels. Shares of Freeport-McMoRan climbed 2.5% to a 15-month high of $52.29, supported by record-high copper prices and an upgraded price target from Wells Fargo.
Market breadth was mixed, with declining stocks narrowly outnumbering advancers on the New York Stock Exchange and more decisively on the Nasdaq. The S&P 500 recorded 35 new 52-week highs and five new lows, while the Nasdaq Composite logged 70 new highs alongside 178 new lows, reflecting continued dispersion beneath the surface even as headline indexes push to record levels.
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